The Sanders Standard for Serious Bank Reform

There will be a lot of talk about holding big banks and Wall Street to
account in coming days, as the Senate takes up the question of how to
overhaul a finanial services industry that is currently defined by a
toxic combination of blind greed, unsustainable speculation and
"too-big-to-fail" threats not just to the economy but to the stability
of this country's democratic experiment.

Most of the measures of success or failure when it comes to regulating
the big banks, the payday lenders, the credit-card sharks and the
Federal Reserve will be made by Republicans who are taking their
marching orders from Wall Street lobbyists and Democrats who are
inclined toward compromises that will keep the corporate campaign
dollars flowing their way in a tough election season.

Who to trust?

How about someone who was complaining about the speculators before their
crashed the economy in the fall of 2008?

How about someone who voted against the bank bailout?

How about someone who has demanded accountability from the Fed not just
in recent years but across the past two decades?

How about someone who, as a lonely member of the House back in 1999,
voted against deregulating the the financial services industry in a
manner that set the stage for the orgy of greed, the boom-and-bust
economy and the predictable meltdowns?

How about Bernie Sanders?

What does the Vermont independent say?

He begins by arguing, correctl, that the great mass of Americans want a
lot more that Republican talking points and Democratic compromises.

"Disgust at Wall Street is profound," says Sanders. "The American people
want us to change in a very profound way how Wall Street functions, and
Congress must deliver."

What's the Sanders Standard profound change of how Wall Street
functions?

The senators says the Senate should amend a tepid financial reform bill
to:

1. Break Up Huge Banks.

The four biggest U.S. banks - Bank of America, Citigroup, JPMorgan Chase
and Well-Fargo - issue two-thirds of all credit cards, write half the
mortgages and control nearly 40 percent of bank deposits in the United
Sates. "We must break up these behemoths because of the incredible
economic power they exert through their concentration of ownership,"
Sanders said. "It is simply not acceptable that a small handful of giant
financial entities can exert such enormous influence over the economic
well being of hundreds of millions of Americans."

2. Make Wall Street Part of the Real American Economy.

"With rampant unemployment and when small- and medium-size businesses
are unable to obtain affordable credit, it is insane that our largest
financial institutions continue to trade trillions in esoteric financial
instruments which makes Wall Street the largest gambling casino in the
world," he said. Instead, Sanders said, we need to create millions of
new jobs by rebuilding our manufacturing base, transforming our energy
system and addressing our transportation and infrastructure crisis. We
need to make sure that businesses get the credit they need to expand and
create employment.

3. Cap Credit Card Interest Rates.

Millions of middle-class Americans who pay their bills on time are being
charged interest rates of 30 percent or more. "That is not only
obscene but, according to every major religion, immoral. Banks cannot
be allowed to engage in usury and charge outrageous interest rates,"
Sanders said. He will offer an amendment that would cap interest rates
for private banks at the same level federal law allows for credit
unions; 15 percent except under exceptional circumstances.

4. End Fed Secrecy.

During the bailout, large financial institutions received trillions of
dollars in near-zero interest loans. "Who received those loans and
under what terms? The Fed won't say. Did some of them turn around
and, in a mammoth welfare scam, invest that Fed money in government
treasury bonds at 3 percent or 4 percent interest rates? The Fed isn't
telling. It's time we had transparency at the Fed so that the American
people know what our central bank is doing with taxpayer dollars,"
Sanders said.

That's the Sanders Standard.

It's the right one to begin with.

Senators who are not on board for these amendments, be they Democrats or
Republicans, should be expected to rise to it.

But they should not stop there. Senators who are serious about reform
should embrace a host of specific proposals developed by top economists
and analysts such as Rob Johnson, the former chief economist for the
Senate Banking Committee; Robert Kuttner, the former chief investigator
for the Senate Banking Committee; Dean Baker, the co-director of the
Center for Economic and Policy Research; and former Secretary of Labor
Robert Reich.

Under the auspices of theAgenda Project's
campaign to "Repair the Foundation of Our Economy," they argue with
regard to proposed financial services reforms that:

Nineteen months after the most devastating financial
crisis since the Great Depression, our financial system remains at risk.
Neither the bill passed earlier this year by the House, nor the one
currently under consideration in the Senate would have prevented the
crisis. Without serious restructuring, they will not prevent a future
crisis.

Sound financial markets are the bedrock of a strong economy. Over the
last decade, under both Democratic and Republican leadership, our
financial sector moved away from core market principles - transparency,
competition, free flow of information and the essential discipline of
failure - that allowed the US economy to thrive. Restoring the integrity
of our financial markets and providing the foundation for economic
recovery, requires re-committing to these principles.

We, the undersigned, call on you to fulfill the responsibilities of your
position by joining together in non-partisan cooperation to pass
legislation that AT A MINIMUM would have prevented the crisis we just
endured. Such legislation must include ALL of the following reforms or
be considered incomplete:

1. Eliminates a perpetual system of government sponsored corporate
bailouts financed by the government or private industry.

2. Increase minimum capital requirements for banks to no less than 8
percent. Apply additional risk-weighted capital requirements for: a)
risk concentration, b) significant interconnectedness with other
financial institutions and c) illiquidity which assumes a decline in
collateral values. Create standard metrics for these variables.

3. Require on balance sheet reporting of all liabilities with disclosure
of related material information including all contingent claims
(including but not limited to swaps, SIVs and VIEs). Provide a private
right of action for failure to comply and for knowingly aiding and
abetting securities fraud.

4. Require all standardized derivatives to be traded over exchanges and
central clearinghouses with pricing transparent to market participants
include a strong presumption that most existing OTC transactions would
be standardized. Require all inter-bank and inter-dealer contingent
claims (including but not limited to derivative and swap transactions)
that cannot be standardized to be reported on a daily basis to a
regulated transparent clearinghouse. Mandate significant and consistent
margin and regulatory requirements across standardized and OTC
contingent claim transactions.

5. Create standardized Pooling and Servicing Agreements and mandate the
timely availability of electronically usable loan level information for
asset backed securities, covered bond and similarly structured
transactions prior to sale. Provide a private right of action and
personal liability for sponsors of securitized underwritings.

6. Establish a timeline for the resolution of Fannie Mae and Freddie
Mac.

7. Mandate that credit rating agencies be subject to the same legal
standards as other market participants.

8. Mandate a separation of the roles of Chairman of the Board and CEO
for regulated financial institutions.

Without these reforms, our economy remains at risk.

The debate over financial services reform will get intense, and complex
at times.

But the measure of real reform is easy.

Begin by meeting the Sanders Standard.

Then get serious about the Agenda Project proposals.

Do that, and the Senate is talking about real reform.

Anything less and the Senate is just talking.